Palestinian leader Mahmoud Abbas says Middle East peace talks are in crisis following Israel's refusal to stop building settlements on occupied Palestinian lands. His comments came hours after the US admitted that it had failed to get Israel to renew its partial freeze on settlement construction. The Obama administration says it is still committed to re-starting talks between Israel and the Palestinians. What isn't clear is exactly how US officials plan to accomplish that. The World's Matthew Bell reports from Jerusalem.

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The Obama administration's latest effort to get Israel and the Palestinians back to the negotiating table has failed. US officials say it's time for a new direction.

It took President Obama 18 months to get the Israelis and Palestinians to start talking to each other. But it only took 3 weeks for those talks fall apart.

Washington had a scheme to get the two sides talking again. It was a trade that the Israeli prime minister was reportedly willing to sign off on. The US would give Israel 20 advanced fighter planes, along with promises of US diplomatic support, in exchange for a 3-month Israeli settlement building freeze.

That deal is dead in the water now.

But State Department spokesman P.J. Crowley said last night, that doesn't mean the whole effort is suspended.

ï¿½We remain determined to work with the parties on a path forward and try to determine how best to advance the process back to negotiations and ultimately to a framework agreement,ï¿½ Crowley said.

In other words, it's back to the drawing board.

The Palestinians are blaming what they call Israeli intransigence for the lack of progress. They have long said that Israel must choose between settlements and peace talks.

But at this point, Palestinian officials are also questioning the credibility of the US administration. Senior Palestinian negotiator Nabil Shaath told the BBC that the Americans, ï¿½have failed for now, and that, no doubt, tarnishes their credibility
about their ability to implement permanent settlement negotiations.ï¿½

Shaath added, ï¿½many options remain on the table.ï¿½

An increasingly popular option for the Palestinian Authority is to try to bypass the peace process altogether and seek unilateral recognition as a state.

The effort has already achieved some success. Brazil and Argentina just formally recognized the state of Palestine. Uruguay is expected to do the same.

The problem with the peace process, Shaath said, is that it's become more about the process than anything else.

ï¿½That doesn't mean that we will continue sitting on our hands, no,ï¿½ Shaath added. ï¿½We will be in the meanwhile acting internationally to broaden the front that supports our rights and our claims to end the occupation, until maybe a different time when the Americans decide they will take a more serious step to get the Israelis to comply.ï¿½

Israel has pointed out that it imposed a partial freeze on settlement building in the West Bank for 10 months, and the Palestinians stayed away from direct negotiations for most of that time.

The Israelis see Palestinian attempts to seek unilateral statehood as detrimental to the peace process and a violation of past agreements. Palestinians would argue that settlement expansion is also a violation of past agreements.

Nonetheless, Israeli government spokesman Mark Regev said his government is ready to comply with Washington's call for direct peace talks.

ï¿½We believe that it is indeed possible to reconcile the Palestinian desire for sovereignty while protecting Israel's most vital national security interests,ï¿½ Regev said.

There has been a feeling among some Israelis that expectations from the US and the Palestinians were unrealistic. They have been asking, how could 3-months be enough time to solve some of the toughest issues (such as borders) facing the two sides?

The expectation is that Secretary of state Hillary Clinton will fill in some of the blanks on Friday. She is scheduled to make a speech in Washington that could include an outline of the administration's new way forward for the Middle East peace process.